Everyone on your real estate team is important. Depending on what type of investing you focus on, however, some team members are more important than others. Anyone that works with rehabs knows the importance of a good contractor. Not only can they help save you money, but they can also make your life a lot easier. Choosing the right contractor is easier said than done. There are several things that need to be accounted for before you commit. Here are five tips to help you pick and work with the best contractor:
1. Prioritize Quality: Anyone that has ever run a business has looked for ways to save money. However, real estate investors need to know when to pick their battles. Going with the contractor that offers the lowest bid may not make the most sense. Sometimes their bid is low because their craftsmanship is not up to par. Of course there are exceptions, but you typically get what you pay for. Whatever you save on the contractor could be lost on costly repairs. Be sure you only have to do a job once.
Price will always be a consideration, but don’t blindly look at the lowest bid. Compare apples to apples, and – more importantly – look at quality of their work. Buyers will compare your home to every other one they see, and you can bet the quality will stand out. The little touches can make a big difference. In the end, it will cost you more to repair or upgrade poor quality work. Don’t be afraid to ask your contractor for references or pictures of previous projects. Take a look at the work, and not just the bottom line.
2. Shop Around: It can be tempting at times to go with the first contractor you talk to. Even if they sound good, you are doing a disservice to yourself if you don’t shop around. As a rule of thumb, you should always talk to at least three different contractors before deciding on one. Not only are you comparing price, but you also want to get a feel for how they operate. Are they punctual? Did they call you back in a timely fashion? Do they understand what you are trying to do with the property? You should treat prospective contractors in the same way you would treat new tenants. Don’t be afraid to ask plenty of questions, and never settle on the first one that shows interest. Even though you are looking for help, they are the ones that want the job. Once you make a decision on a contractor, it may be too late to turn back until the project is over. Take your time and talk to as many people as you need to.
3. Check For Licensing & Insurance: If a prospective contractor isn’t licensed and insured, there is no reason to continue negotiations. Simple as that. Any contractor you work with should be able to provide proper documentation of both licensing and insurance. You may be able to save a decent amount of money going with someone who isn’t licensed, but is it really worth it? Whatever you save will be gone in an instant. Regardless of how experienced or cautious a contractor may be, things will always happen on every project. Not all of them will be severe, but there are plenty of little things that can leave you exposed. Additionally, an unlicensed contractor may be a sign that they are willing to cut corners to get things done.
4. Set Up A Payment Schedule: Nothing can ruin a relationship quicker than mishandling money. There is a delicate balance between when and how you pay your contractor. Unless you have a long standing, established relationship with your contractor, never pay them too much money before they start the project. Not only do you expose yourself to get taken advantage of, you also may not get your contractors best effort. Always leave a bit of a carrot, as an incentive to finish the job. Once the job is over, it is critical that you pay them as quickly as possible. You don’t want to get the reputation as someone who doesn’t pay when the job is finished.
5. Communicate: As with anyone on your team, communication is essential. You never want to have your contractor tell you that they didn’t know you wanted something done a certain way. Before any job is started, you need to sit down and make sure you are both on the same page. An hour for lunch or a cup of coffee can make all the difference. Talk about work expectations, budgets, time frames and scheduling. If there are any lingering questions, now is the time to address them. You will both get an idea of each other once you start working together, but you can avoid any miscommunication by meeting before you begin.
A good contractor will not only save you time and money, but will help your projects run as smooth as possible. Review these five tips before you commit to working with anyone.